Regional Multifamily Market: Steady as She Goes

PORTLAND-With interest rates low and overbuilding in the late 1990′s finally being overcome, local specialists say the Greater Portland apartment market appears stable in the face of an otherwise troublesome commercial real estate market. Although there hasn’t been much investment activity, vacancies remain high, says Tim O’Brien, a principal with Hagerman Frick O’Brien LLC, a local firm specializing in multifamily brokerage.

“This year continues to be soft on the investment side, but that’s only because not a lot of people want to sell their most stable investment,” O’Brien tells GlobeSt.com. “Those that are selling are doing so because the lower interest rates are allowing private investors seeking a safe haven to pay a premium, and also because some owners simply prefer to convert to cash in these uncertain times.”

As far as what is selling, O’Brien says all classes are moving, but generally it’s more the class A product thanks to institutions and REITs reorganizing their portfolios, and also because in times like this people want an asset they don’t have to turn around.

The price per unit paid is generally the same throughout the region — from $65,000 to $85,000 per unit for class A product to between $40,000 and $50,000 for class C product — but Downtown deals are selling at around an 8% cap rate, while suburban deals are at 8.5% and above due to higher inventories and higher risk, says O’Brien.

As far as new product under construction, specific numbers weren’t available, but O’Brien says average annual absorption is 4,000-to-5,000 units. Due to previous overbuilding, however, new development has been closer to 2,000-to-3,000 units per year on average, with much of that being subsidized.

The hottest market remains Portland’s vibrant Downtown, and anything with in 50 blocks of it, says O’Brien. “Apartment buildings in that area, for all intents and purposes, are fully occupied, and owners have a waiting list,” he says. “Region-wide, occupancy stands at 95%.”